Covid-19 Causing You Problems Getting a Home Loan? Help May Be On the Way

During the Covid-19 pandemic, there has been a tightening of lending standards making it more difficult to get a home loan. However, help may be on the way from the Federal Housing Financing Agency (FHFA) as it is considering whether to allow Fannie Mae and Freddie Mac, the government controlled mortgage finance agencies, to buy home loans which have gone into a forbearance stage. Such a step would ease strains on mortgage companies facing a cash crunch as homeowners struggling with the pandemic’s effects suspend making their monthly payments.

Fannie and Freddie previously announced that they would not buy loans in forebearance which would leave debt piling up on the books of companies that both originate and service home loans. However, FHFA is supposedly going to make an announcement soon about this policy. Mortgage companies must continue to pay investors in the home loans even though the homeowners have suspended making payments. The cash crunch which this creates can be extremely damaging to the home lending business.

Homeowners are skipping mortgage payments as Covid-19 causes unemployment rates to zoom upward. As part of the $2 trillion stimulus package, homeowners directly affected by the pandemic are allowed to suspend making payments for as long as a year without penalty, i.e., foreclosure/late fees. It is possible that Fannie and Freddie deciding to not buy loans in forbearance helped fuel uncertainty over the cost of servicing new mortgages which caused a tightening of lending standards which has made it difficult for all but the most creditworthy borrowers to get a home loan.

For nearly 40 years, Attorney Lester Berman has practiced in the areas of real estate and litigation matters representing clients throughout the state of Nevada.

Drizin Law is providing this information for educational purposes only. It should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. This information is based on general principles of Nevada law at the time it was created and you should be aware laws frequently change. Moreover, the laws affecting you may differ depending on the circumstances. You should consult with a qualified attorney in your own state or jurisdiction concerning your particular situation. Review of this information does not create an attorney-client relationship.